Barnes & Noble has announced that it is abandoning the color tablet business in an effort to stabilize its lossmaking Nook digital division.

On Tuesday, the bookseller announced that the Nook unit's revenues were down 34.0 per cent in the fourth quarter, year on year, and down 16.8 per cent for all of fiscal 2013.

In all, the Nook business brought in just $776m in fiscal 2013, compared to the $4.6bn Barnes & Noble took in from its retail operations.

The company attributed much of that weak performance to slow hardware sales, particularly of its Nook HD and Nook HD+ color tablets. And indeed, according to figures from IDC, Nook tablets managed to capture just 1.9 per cent of the market during the all-important 2012 holiday shopping season, trailing behind Apple, Samsung, Amazon, and Asus.

Barnes & Noble now says it is biting the bullet, and will cease manufacturing the Nook HD and Nook HD+, effective immediately. Rather than building any more own-branded tablets itself, the bookseller says it will pursue "a partnership model for manufacturing," where future color devices will be co-branded with as-yet-unnamed electronics manufacturers.

The move roughly jibes with analysts' expectations, though it comes a little later than many shareholders might have hoped. The Nook division has been posting similar losses for the past several quarters.

While some analysts expected Barnes & Noble to pull out of the hardware business altogether, the company says it will continue to produce its line of E-Ink reading devices in-house – including the Nook Simple Touch and Nook Simple Touch with Glowlight – and that it even plans to innovate in that category.

The Nook division will also continue to develop "reading platforms," which includes launching new Nook apps for PCs and mobile devices.

Barnes & Noble's statement on Tuesday had little to say about its relationship with Microsoft, which many believe to be angling to purchase the Nook division, with one exception: a brief mention in the legal fine print hinted that the bookseller's current business arrangement with Redmond involves "international expansion."

That actually makes some sense, because when you take tablets out of the equation, sales of Nook content have actually been on the rise. Revenues from content sales were up 16.2 per cent for fiscal 2013.

If those gains continue, and if the Nook division can tighten its focus on selling e-books and magazines without worrying about the risks of building its own hardware, it still stands a chance of competing with the likes of Amazon and Apple in the global content marketplace.

Barnes & Nobles says it will continue to sell its remaining stock of Nook HD and Nook HD+ tablets through the holiday season, so you may want to keep your eye out for some attractive bargains as the autumn months approach. ®